Always State a Value When Asked for a Price

Often times a professional is asked about cost, as in, “How much will this cost?” One of the best answers I have heard goes something like this – “Customers of ours who have saved and/or seen an increase of $V, have spent $P, but unless we can discover $V we won’t even send you a proposal.”

I personally believe that V should be at least three times P. My reasoning is that in the rare cases the price ends up being 2P, the value is still greater than price.

This is not a perfect answer and does not always move the asker off the cost question, but it is the only way I have seen that has a chance in moving them at all.

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Ed Kless joined Sage in July of 2003 and is currently the senior director of partner development and strategy for Sage Business Solutions in North America. He is the co-host with Ron Baker of the Voice America Business Channel's The Soul of Enterprise. Prior to joining Sage Software, Ed worked with Tipping Point Advisors, an organization dedicated to the growth and development of software implementation companies. Before that, he co-founded Third Wave Business Systems, a Microsoft Business Solutions Partner, in 1996, which grew to 20 team members and 5 million in revenue. At Third Wave, Ed developed the implementation methodology and managed the front and back office consulting teams. Ed is senior fellow at the VeraSage Institute, a think tank dedicated to the elimination of the billable hour in all professional organization. He is a frequent contributor to industry publications and has spoken at many conferences worldwide.

5 thoughts on “Always State a Value When Asked for a Price”

I’m sitting here eating my tuna sandwich and catching up on your site. I am trying to loosen the vines of the programing that bind me, so help me here. What is my reply when the customer asks if $P is determined by $V? I’m sure you have already been down this road, so you know where I am going with this. And if the answer I “absolutely”, then how do I deal with “because our revenues are larger, we have to pay more than someone with smaller numbers?”.

Wouldn’t it be easy to start down the slippery slope of “the rich should pay more”?

I would not say that $V “determines” $P, but it certainly has an influence on it. Technically, it is called price discrimination and it happens all the time and for different reasons.

This most common example would be airlines charging more for someone who books just before the flight as compared to someone who booked a few weeks before. In this case, the airline assumes that it is more valuable because the late booker is more likely a business traveller. In your case, you are actually making fewer assumptions to develop price.

This is also where giving a customer at least three options is an important factor.

I’m still not sure about the slippery slope I asked about…….is it the business traveler has more money or is that just the price you pay for waiting until the last minute, therefore supply becomes more scare? I guess what I’m saying is I’m not sure the business traveler analogy is the same as “the rich pay more”?

All you need to do is go to a market vendor anywhere in the world to see this in action.

These vendors are absolutely measuring your ability to pay when deciding what price to quote. They look at your clothes, your jewelry and your ethnicity among other factors.

On the original question, I would turn it back to the customer (not client) by saying to them that if you can not offer the solution at a price that is one third of $v then it isn’t worthwhile for the customer. If that situation arises you can discuss how the customer would like to proceed.